Some Simple Economics of Crowdfunding

  title={Some Simple Economics of Crowdfunding},
  author={Ajay Agrawal and Christian Catalini and Avi Goldfarb},
  journal={Innovation Policy and the Economy},
  pages={63 - 97}
It is not surprising that the financing of early-stage creative projects and ventures is typically geographically localized since these types of funding decisions are usually predicated on personal relationships and due diligence requiring face-to-face interactions in response to high levels of risk, uncertainty, and information asymmetry. So, to economists, the recent rise of crowdfunding—raising capital from many people through an online platform—which offers little opportunity for careful… Expand

Paper Mentions

Is Wisdom of Crowds a Positive Signal? Effects of Crowdfinancing on Subsequent Venture Capital Selection
We examine the impact and signaling effects that prefunding has on subsequent venture capital funding rounds. The seed funding gap is still a major obstacle for the initiation of new ventures.Expand
Online Syndicates and Startup Investment
Early crowdfunding platforms were based on a premise of disintermediation from professional investors, and relied on the ‘wisdom of the crowd’ to screen high quality projects. This becomesExpand
Entrepreneurial Crowdfunding without Private Claims
For a wide class of crowdfunding approaches, we argue that the reward structure (for funders) is closer to that of charitable donations to public goods than it is to traditional entrepreneurialExpand
Risk-Reducing Options in Crowdinvesting: An Experimental Study
Financial constraints are a striking difficulty of entrepreneurial ventures in the early stages of their development. Recently, emerging crowdinvesting platforms try to fill this finance gap byExpand
Crowdfunding: Tapping the Right Crowd
With crowdfunding, an entrepreneur raises external financing from a large audience (the "crowd"), in which each individual provides a very small amount, instead of soliciting a small group ofExpand
Crowdfunding: Tapping the Right Crowd
With crowdfunding, an entrepreneur raises external financing from a large audience (the "crowd"), in which each individual provides a very small amount, instead of soliciting a small group ofExpand
Crowdfunding: Tapping the Right Crowd
The basic idea of crowdfunding is to raise external finance from a large audience (the “crowd”), where each individual provides a very small amount, instead of soliciting a small group ofExpand
Information Asymmetry and Adverse Wealth Effects of Crowdfunding
The Jumpstart Our Business Startups (JOBS) Act of 2012 in the U.S. expanded the capital markets so that entrepreneurs can appeal directly to non-traditional small crowd investors for investmentExpand
The Value of Crowdfunding: An Explanation Based on Demand Uncertainty and Comparison with Venture Capital
ABSTRACT This article notes that an advantage of crowdfunding is in its ability to help start-up firms acquire more accurate market demand information regarding new products when compared withExpand
Crowdfunding under Social Learning , Network Externalities , and Financial Constraints
  • 2017
Introduction. Crowdfunding describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support effortsExpand


The Dynamics of Crowdfunding: An Exploratory Study
Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using theExpand
Crowdfunding of Small Entrepreneurial Ventures
An inherent problem that entrepreneurs face at the very beginning of their entrepreneurial initiative is to attract outside capital, given the lack of collateral and sufficient cash flows and theExpand
An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets
It is found that the duration of funding and the degree of exposure that a pitch receives over the course of the funding process, are positively associated with readership upon the story’s publication, which appears to validate the widely held belief that a key benefit of the crowdfunding model is the potential it offers for awareness and attention-building around causes and ventures. Expand
Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter
Entrepreneurs are turning to crowdfunding as a way to finance their creative ideas. Crowdfunding involves relatively small contributions of many consumer-investors over a fixed time period (generallyExpand
Signaling in Equity Crowdfunding
This paper presents a first–ever empirical examination of the effectiveness of signals that entrepreneurs use to induce (small) investors to commit financial resources in an equity crowdfundingExpand
Crowdfunding or Fraudfunding? Social Networks and the Securities Laws – Why the Specially Tailored Exemption Must be Conditioned on Meaningful Disclosure
Social networks have been used as a medium for financing films and other performing arts, as well as for charitable solicitations. These and similar fundraising endeavors are known as crowdfunding.Expand
Rational Herding in Microloan Markets
A unique panel data set that tracks the funding dynamics of borrower listings on, the largest microloan market in the United States, finds evidence of rational herding among lenders and shows that rational herded beats irrational herding in predicting loan performance. Expand
Reputation on the Internet
Economists have long studied the phenomenon of reputation, broadly defined as what agents (e.g., buyers) believe or expect from other agents (e.g., sellers). In a recent (partial) survey of theExpand
Financial Value of Reputation: Evidence from the eBay Auctions of Gmail Invitations
In a marketplace of repeated transactions with asymmetric information, theory predicts that sellers with a good reputation have a higher probability of sale and receive a higher transaction price. InExpand
Provision of Public Goods: Fully Implementing the Core through Private Contributions
Standard economic intuition would say that private provision of public goods will be inefficient due to free-rider problems. This view is in contrast to the results in the literature on fullExpand